CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Update: States That Allow Benefit Corporations

By: Teri Mayor, COGENCY GLOBAL INC. on Thu, May 01, 2014

Legislation allowing for the formation of a “benefit corporation” – a Benefit Corporationfor-profit entity that “voluntarily meets higher standards of corporate purpose, accountability, and transparency”[1] – is effective in 20 states, as of this writing. Sixteen more states have legislation pending.

As with all business corporations, a benefit corporation has shareholders to whom it maintains its fiduciary responsibility. Additionally, it: “1) [has] a corporate purpose to create a material positive impact on society and the environment; 2) [is] required to consider the impact of [its] decisions not only on shareholders but also on workers, community, and the environment; and 3) [is] required to make available to the public an annual benefit report that assesses [its] overall social and environmental performance against a third party standard.”[2] The annual report will address how well it has met the third party standards to which it ascribes. Each corporation chooses, up front, which third party’s guidelines best meet its overall purpose. The annual report then becomes the final measure of the corporation’s “benefit” to the common good.

There is a model statute which, beyond requiring the annual report be published for public review, requires the corporation also file it with the state’s corporate administrator. However, approximately half of the states in which legislation is effective have no filing requirement (see below).

Benefit Corporation Legislation is Currently Effective in the Following Jurisdictions:
Arizona Delaware* Louisiana* New Jersey South Carolina
Arkansas Distric of Columbia Maryland* New York Utah
California* Hawaii* Massachusetts Oregon* Vermont*
Colorado* Illinois* Nevada* Pennsylvania Virginia*
*State statute does not require annual filing with corporate administrator.

Benefit Corporation Legislation Has Been Introduced in the Following Jurisdictions:
Alaska Georgia Kansas Montana Puerto Rico
Alabama Idaho Kentucky Nebraska West Virginia*
Connecticut Indiana Michigan New Hampshire Wisconsin
Florida Iowa Minnesota Ohio  
*Passed legislature; sent to Governor for signature

Because it enables business corporations to fulfill a mission that goes beyond making a profit and creates a positive impact on society and the environment, the benefit corporation structure is gaining popularity, as evidenced by the number of states that have introduced and enacted legislation to allow it.
 
 
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Company Formation and Filing Considerations